CDP-2,3-di-O-geranylgeranyl-sn-glycerol synthase (CDP-archaeol synthase) activity was discovered in the membrane fraction of the methanoarchaeon Methanothermobacter thermoautotrophicus cells. It catalyzed the formation of CDP-2,3-di-O-geranylgeranyl-sn-glycerol from CTP and 2,3-di-O-geranylgeranyl-sn-glycero-1-phosphate (unsaturated archaetidic acid). The identity of the reaction product was confirmed by thin layer chromatography, fast atom bombardment-mass spectroscopy, chemical analysis, and by UV spectroscopy. One mole of the product was formed from approximately 1 mol of each of the reactants. The enzyme showed maximal activity at pH 8.5 and 55 degrees C in the presence of Mg(2+) and K(+) ions. By in vivo pulse labeling of phospholipids with (32)P(i), CDP-archaeol was found to be an intracellular intermediate. A cell-free homogenate of M. thermoautotrophicus, when incubated with l-serine, converted the product of CDP-archaeol synthase reaction to a product with the same chromatographic mobility as archaetidylserine. It was concluded from these results that both CDP-archaeol and CDP-archaeol synthase were involved in cellular phospholipid biosynthesis. Among various synthetic substrate analogs, both enantiomers of unsaturated archaetidic acid possessing geranylgeranyl chains showed similar levels of activity, while archaetidic acid with saturated or monounsaturated isoprenoid or straight chains was a poor substrate, despite having the same stereostructure as the fully active substrate. The ester analogs with geranylgeranioyl chains showed significant activities. These results suggest that the enzyme dose not recognize ether or ester bonds between glycerophosphate and hydrocarbon chains nor the stereostructure of the glycerophosphate backbone but mainly targets substrates with geranylgeranyl chains.